EX-99.1 2 v147471_ex99-1.htm Unassociated Document
Exhibit 99.1
 
FOR INFORMATION CONTACT:
Elisha Finney (650) 424-6803
elisha.finney@varian.com

Spencer Sias (650) 424-5782
spencer.sias@varian.com

For Immediate Release:

 
Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2009

PALO ALTO, Calif., April 29, 2009 – Varian Medical Systems (NYSE:VAR) today reported net earnings from continuing operations of $0.64 per diluted share in the second quarter of fiscal year 2009 versus net earnings from continuing operations of $0.57 per diluted share in the year-ago quarter.  Including the discontinued ACCEL research instruments operation, net earnings per diluted share in the quarter were $0.54.

Compared to continuing operations in the year-ago quarter, second quarter revenues rose 7 percent to $554 million, net orders rose 2 percent to $524 million, and the backlog rose 12 percent to $1.9 billion.

“Net orders grew in our Oncology Systems and Security and Inspection Products businesses but fell in our X-Ray Products business,” said Tim Guertin, president and CEO of Varian Medical Systems.  “Revenues from continuing operations increased in all three businesses, and our gross margin improved by nearly three percentage points contributing to higher earnings versus the year-ago quarter.  However we began to feel the effects of the global recession during the quarter which resulted in modest net orders growth. Currency fluctuations negatively impacted orders and revenue growth in the quarter.”

The company ended the second quarter with $375 million in cash and cash equivalents and $43 million of debt. Days sales outstanding was 87 for the quarter, an improvement of three days versus the year-ago period and up four days from the preceding quarter.  The company did not repurchase shares of its stock during the period.

Oncology Systems
Oncology Systems’ revenues for the quarter totaled $445 million, up 6 percent from the second quarter of last fiscal year.  This business recorded second-quarter net orders of $434 million, up 5 percent from the same period last year.  Net orders were up 4 percent in North America and up 7 percent in international markets.

  “Oncology Systems’ order growth was driven primarily by our service business and international demand,” said Guertin.  “Oncology order growth was 10 percent on a constant currency basis. The North American order growth rate was slowed by tightened
 
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Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2009
Page 2
 
capital budgets and tougher credit requirements.  A shift toward North American deliveries and a richer product mix including RapidArc contributed to significant growth in gross margins for this business.”
 
X-Ray Products
Revenues for the X-Ray Products business, including tubes and digital flat-panel detectors for filmless X-ray imaging, were $86 million for the second quarter, up 15 percent from the year-ago quarter.   Net orders for this business were $69 million, down 17 percent from the year-ago quarter.

“X-ray Product orders were impacted by customers who are now adjusting  inventory levels to reflect slower imaging equipment sales in a recessionary environment,” said Guertin.  “Orders for high-tier CT and mammography tubes declined.  Decreases in dental and veterinary imaging panel orders offset significant growth in orders for our emerging line of radiographic panels.  Higher revenues combined with operational improvements and reductions in quality cost led to a substantial margin increase for this business.”

Other Businesses
The company’s Security and Inspection Products (SIP) business, proton therapy business, and Ginzton Technology Center reported combined fiscal 2009 second quarter revenues of $23 million, up 3 percent from the year-ago quarter.  Net orders for the quarter were $21 million, up 9 percent versus the year-ago quarter due exclusively to the SIP business.

The company completed the sale of the ACCEL research instruments business to Bruker Corporation during the quarter and recognized an $11.5 million loss net of taxes from discontinued operations.  The company’s proton therapy business will continue operating under the name Varian Particle Therapy.

Outlook
“Our outlook for the balance of the fiscal year is more cautious due to tighter capital budgets and credit, currency fluctuations, a longer order-to-delivery cycle in Oncology, and weaker demand for X-ray products.” Guertin said.  “We now believe that fiscal year 2009 revenues from continuing operations could grow by about 5 to 8 percent.  With the help of cost control measures that the company has put in place for fiscal year 2009 and beyond, we believe that net earnings per diluted share from continuing operations for the fiscal year could grow to between $2.50 and $2.60 compared to $2.31 from continuing operations in last fiscal year.  For the third quarter of fiscal year 2009, revenues could grow in the range of 5 to 7 percent, with higher growth in operating earnings.  Including a higher expected tax rate and lower interest income, third quarter net earnings per diluted share from continuing operations should be in the range of $0.61 to $0.65.”
 
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Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2009
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Investor Conference Call
Varian Medical Systems is scheduled to conduct its second quarter fiscal year 2009 conference call at 2 p.m. PT today.  To hear a live webcast or replay of the call, visit the investor relations page on the company’s web site at www.varian.com where it will be archived for a year.  To access the call via telephone, dial 1-800-659-2037 from inside the U.S. or 1-617-614-2713 from outside the U.S. and enter confirmation code 66725913.  The replay can be accessed by dialing 1-888-286-8010 from inside the U.S or 1-617-801-6888 from outside the U.S. and entering confirmation code 11191883.  The telephone replay will be available through 5 p.m. PT, Friday, May 1, 2009.

# # #

Varian Medical Systems, Inc., of Palo Alto, California, is the world's leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy, and brachytherapy. The company supplies informatics software for managing comprehensive cancer clinics, radiotherapy centers and medical oncology practices. Varian is a premier supplier of tubes and digital detectors for X-ray imaging in medical, scientific, and industrial applications and also supplies X-ray imaging products for cargo screening and industrial inspection. Varian Medical Systems employs approximately 5,100 people who are located at manufacturing sites in North America, Europe, and China and approximately 79 sales and support offices around the world. For more information, visit http://www.varian.com.
 
Forward-Looking Statements
Except for historical information, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements concerning industry outlook, including growth drivers; the company’s future orders, revenues, backlog, or earnings growth; future financial results; market acceptance of or transition to new products or technology such as RapidArc therapy, image-guided radiation therapy (IGRT), stereotactic radiosurgery, filmless X-rays, proton therapy, and security and inspection, and any statements using the terms “believe,” “could,” “should,” or similar statements are forward-looking statements that involve risks and uncertainties that could cause the company’s actual results to differ materially from those anticipated. Such risks and uncertainties include the effect of economic conditions, including the current global recession, currency exchange rates and tax rates; the impact of health care reforms, and/or third-party reimbursement levels and credit availability for capital expenditures for cancer care; demand for the company’s products; the company’s ability to develop and commercialize new products; the company’s ability to complete the planned sale of instruments portion of the company’s ACCEL proton therapy business; the company’s reliance on sole or limited-source suppliers; the impact of reduced or limited demand by sole purchasers of certain X-ray tubes; the company’s ability to maintain or increase operating margins; the impact of competitive products and pricing; the company’s ability to meet Food and Drug Administration and other regulatory requirements for product clearances or to comply with Food and Drug Administration and other regulatory regulations or procedures; the ability to make strategic acquisitions and to successfully integrate the acquired operations into the company’s business; the company’s ability to protect the company’s intellectual property; the potential loss of key distributors or key personnel; and the other risks listed from time to time in the company’s filings with the Securities and Exchange Commission, which by this reference are incorporated herein. The company assumes no obligation to update or revise the forward-looking statements in this release because of new information, future events, or otherwise.
 
A summary of earnings and other financial information follows.
 

 
Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2009
Page 4
 
Varian Medical Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)
 
(Dollars and shares in millions, except per share amounts)
 
Q2 QTR
2009
   
Q2 QTR
2008
   
Q2 YTD
2009
   
Q2 YTD
2008
 
Net orders
  $ 524.2       515.4       1,075.5       1,004.4  
Oncology Systems
    434.2       413.1       861.8       798.8  
X-Ray Products
    68.8       83.0       159.9       158.1  
Other
    21.2       19.3       53.8       47.5  
                                 
Order backlog
  $ 1,901.0       1,690.3       1,901.0       1,690.3  
                                 
Revenues
  $ 553.6       518.4       1,062.3       969.6  
Oncology Systems
    444.6       421.2       842.8       781.5  
X-Ray Products
    85.8       74.8       171.9       144.9  
Other
    23.2       22.4       47.6       43.2  
Cost of revenues
  $ 313.2       306.8       602.9       566.9  
                                 
Gross margin
    240.4       211.6       459.4       402.7  
As a percent of revenues
    43.4 %     40.8 %     43.2 %     41.5 %
                                 
Operating expenses
                               
Research and development
    37.0       31.9       74.0       60.8  
Selling, general and administrative
    81.1       75.1       164.4       150.2  
                                 
Operating earnings
    122.3       104.6       221.0       191.7  
As a percent of revenues
    22.1 %     20.2 %     20.8 %     19.8 %
                                 
Interest income/(expense), net
    (0.4 )     1.6       1.0       3.1  
Earnings from continuing operations before taxes
    121.9       106.2       222.0       194.8  
Taxes on earnings
    42.6       33.3       73.1       63.7  
Earnings from continuing operations
    79.3       72.9       148.9       131.1  
As a percent of revenues
    14.3 %     14.1 %     14.0 %     13.5 %
Loss  from discontinued operations – net of  taxes  (1)
    (11.5 )     (1.6 )     (12.3 )     (4.3 )
Net earnings
  $ 67.8       71.3       136.6       126.8  
                                 
Net earnings (loss) per share – basic:
                               
Continuing operations
  $ 0.64       0.58       1.20       1.05  
Discontinued operations  (1)
    (0.09 )     (0.01 )     (0.10 )     (0.03 )
Net earnings per share
  $ 0.55       0.57       1.10       1.02  
                                 
Net earnings (loss)  per share – diluted:
                               
Continuing operations
  $ 0.64       0.57       1.19       1.03  
Discontinued operations  (1)
    (0.10 )     (0.01 )     (0.10 )     (0.04 )
Net earnings per share
  $ 0.54       0.56       1.09       0.99  
                                 
Shares used in the calculation of net earnings per share:  
                               
Average shares outstanding - basic
    123.8       125.2       123.8       125.0  
Average shares outstanding - diluted
    124.5       128.0       124.8       127.9  
 
(1) The operating results of ACCEL research instruments are classified as discontinued operations for all periods presented.
 

 
Varian Medical Systems Reports Results for Second Quarter of Fiscal Year 2009
Page 5
 
Condensed Consolidated Balance Sheets
 
             
(In thousands)
 
April 3,
   
September 26,
 
 
2009
   
2008 (2)
 
 
(Unaudited)
       
Assets
           
Current assets
           
    Cash and cash equivalents
  $ 374,617     $ 397,306  
    Restricted cash
    2,340       -  
    Accounts receivable, net
    534,789       486,310  
    Inventories
    340,240       282,980  
    Deferred tax assets and other
    198,168       209,006  
    Current assets of discontinued operations (1)
    -       18,799  
Total current assets
    1,450,154       1,394,401  
                 
Property, plant and equipment
    503,897       452,576  
    Accumulated depreciation and amortization
    (251,624 )     (234,393 )
Property, plant and equipment, net
    252,273       218,183  
                 
Goodwill
    203,871       209,146  
Other assets
    157,693       150,694  
Long term assets of discontinued operations (1)
    -       3,088  
Total assets
  $ 2,063,991     $ 1,975,512  
                 
Liabilities and Stockholders’ Equity
               
Current liabilities
               
    Accounts payable
  $ 111,070     $ 105,281  
    Accrued expenses
    226,756       252,915  
    Deferred revenues
    131,464       141,368  
    Advance payments from customers
    224,082       201,783  
    Product warranty
    48,892       51,141  
    Short-term borrowings
    10,000       -  
    Current maturities of long-term debt
    2,746       7,987  
    Current liabilities of discontinued operations (1)
    -       21,202  
Total current liabilities
    755,010       781,677  
Other long-term liabilities
    152,154       134,251  
Long-term debt
    29,774       32,399  
Total liabilities
    936,938       948,327  
                 
Stockholders’ Equity
               
Common stock
    125,360       125,590  
Capital in excess of par value
    486,584       468,384  
Retained earnings and accumulated other comprehensive loss
    515,109       433,211  
Total stockholders’ equity
    1,127,053       1,027,185  
Total liabilities and stockholders’ equity
  $ 2,063,991     $ 1,975,512  
                                                                                                                                                                                  
(1)  The assets and liabilities of ACCEL research instruments are classified as discontinued operations.
 
(2)  The condensed consolidated balance sheet as of September 26, 2008 was derived from audited financial statements as of   that date.